I recently posted a blog on Construction Today’s website with tips for business owners to better manage cash flow – one of the key indicators of business performance. The advice was aimed at construction professionals, but the five steps I outlined are good for any company to follow.
Having adequate cash flow can help you secure a line of credit. And if your credit request is denied, it will allow your business to continue operating. Take the following steps to improve operating efficiencies and reduce expenses, and remember: cash is king.
- Project your company’s cash flow for the upcoming year. Establish your annual operating budget and then estimate the expected income and expenses for each month. Keep detailed records of expenses throughout the year.
- Use technology to streamline cash flow management. With the proper resources, such as QuickBooks, you can automate and optimize your operations to improve billing and pay expenses in a timely manner, which can help you avoid penalties.
- Make your vendor contracts work for you. Look for any available tax credits on big-ticket items, and adjust the payment schedule to reduce the net bill. Always shop around for major purchases. Bid the purchases to several dealers, and negotiate contract terms to cut your costs.
- Balance the use of freelancers or subcontractors with your general staff to control labor costs and add some flexibility to the pay schedule.
- Increase efficiency of billing and collections by implementing an organized, automated system. Issue invoices in advance to give clients enough time to respond. If your company needs help with collections, consider hiring a specialist. Billing and collecting on time allows you to pay your suppliers and avoid extra charges.